Discount broker Charles Schwab (NYSE:SCHW) stock has weathered the market sell-off relatively unscathed as shares have been trading in a 10-point range.
The Q4 2021 earnings report revealed a shortfall in revenues stemming from lower trading revenues. The sharp collapse in meme and momentum stocks has no doubt burned many retail investors who are becoming bagholders and cut down on their trading activity.
Schwab is the "original" discount broker that started in the era way before retail electronic trading existed. The Company has remained on the cutting edge of trading technology and adopted the zero-commission trading model to stay competitive thanks to fintech brokers like Robinhood (NASDAQ:HOOD). However, unlike Robinhood, Schwab is very profitable and is not a money pit relying mostly on order flow arrangements.
As the Federal Reserve positions to raise interest rates to combat inflation, financial stocks should be beneficiaries. Prudent investors seeking exposure in the retail investing and trading segment can watch for opportunistic pullbacks in shares of Schwab.
Q4 2021 Earnings Release
On Jan. 18, 2022, Schwab released fiscal Q4 2021 results for the quarter ending in December 2021. The Company reported an earnings per share (EPS) profit of $0.86 versus $0.88 consensus analyst estimates, missing by (-$0.02). Revenues grew 12.7% year-over-year (YoY) to $4.71 billion, missing analyst estimates for $4.77 billion.
Schwab CEO Walt Bettinger commented,
“We delivered another year of record-breaking growth and financial performance in 2021 by staying true to our 'Through Clients' Eyes' strategy in the face of a fluctuating environment. That shifting picture included strengthening investor optimism early on, fueled by an advancing economic recovery, expanding vaccine rollouts and government aid packages.
"Then came increasing debates regarding the overall pace of economic growth, the potential path of inflation, and the ultimate impact of multiple global market disruptions. After rising throughout the first half of 2021, the major equity indices were essentially flat during the summer months before the ongoing recovery helped them close the year at near-record levels. While short-term interest rates remained near zero throughout the year, longer-term rates began to rise initially, then eased and rose again in keeping with the economic outlook - the 10-year Treasury yield finally ended 2021 at 1.52%, up 59 basis points from year-end 2020."
Winder Update
On Jan. 28, 2022, Schwab provided a winder update through a slide presentation. The Company raised funding for its corporate bonus plan by 125% following a record 2021. The expense strategy captured approximately 50% of its $1.8 billion to $2 billion target. Proprietary SAMS inflows rose 50% in 2021.
January 2022 Update
On Feb. 14, 2022, Schwab provided highlights for the month of January 2022. Core net new assets from clients totaled $33.5 billion. Total client assets rose 15% YoY for January at $7.80 trillion, but down (-4%) sequentially from December 2021. Client cash as a percentage of assets was 11.3% versus $10.9% in December 2021 and 12.2% in January 2021.
SCHW Opportunistic Pullback Levels
Using the rifle charts on weekly and daily time frames provides a precision view of the landscape for SCHW stock. The weekly rifle chart peaked at the $96.20 Fibonacci (fib) level.
The weekly rifle chart formed a channel tightening from the 5-period moving average (MA) at $88.95 to the 15-period MA at $85.66 as the weekly stochastic formed a mini inverse pup that fell under the 80-band. The weekly 50-period MA sits at 76.31. The weekly upper Bollinger® Bands (BBs) sit at $71.65. The weekly market structure low (MSL) buy triggers on a breakout through $89.69.
The daily rifle chart breakdown formed with a falling 5-period MA at $87.67 and 15-period MA at $90.12 as it also fell under the daily 50-period MA at $88.14. The daily lower BBs sit at $83.48 as the daily stochastic works a full oscillation down towards the 20-band. The daily lower BBs sit at $83.48.
Prudent investors can look for opportunistic pullback levels at the $83.45 fib, $80.81 fib, $79.44 fib, $77.68 fib, $75.82 fib, $73.73 fib, $71.62 fib, and the $68.95 fib level.